Buying a home is a dream for a lot of people, however, spending the next thirty years paying off a mortgage can be another person’s nightmare. Paying for a home in cash isn’t an option for most people, so mortgages are the way to go. A thirty-year mortgage loan is a common term that most people accept, but there are other ways to pay off your mortgage, you have to ask the right questions.
Below are practical ways to pay off your mortgage quicker and own your own home sooner.
1. Bi-Weekly Mortgage Payment
Choose to pay your mortgage payments bi-weekly instead of once per month. Paying half of your mortgage payment fortnightly will make one extra payment each year. Therefore you are significantly reducing how long it takes to pay off your mortgage because you are paying thirteen home loan payments instead of twelve each year.
2. Higher Monthly Payments
Some banks do not allow the bi-weekly or partial payments to be set up when scheduling payments. However, if you can pay slightly higher monthly payments, then you can achieve the same results as if you were making mortgage payments bi-weekly. Firstly, you have to figure out how much more one extra home loan payment is each year. Divide that figure by twelve and then add that figure to each monthly payment. By doing this, you could cut your mortgage term from thirty years to twenty-three years.
3. Choose a 15-Year Mortgage Term
Don’t be afraid to ask your mortgage lender for other options in regards to the length of your term. Thirty years is the term that people have come to expect however there are other options out there. Can you afford the mortgage payments of a fifteen-year loan? Yes, the payments will be higher but if you can afford the difference then the equity in your home will grow quickly, and you will own your home significantly faster. There are mortgage loan calculators available that will estimate what the difference is between a shorter and longer mortgage term.
4. Make Good Use of Extra Money
Commit to making good use of the extra money that comes in during the year. Do you get a good amount of money back at tax time? A tax refund of $2000 every year can help you pay off your mortgage quicker. Maybe you have picked up a few more shifts at works or got a promotion? Consider putting that extra money you receive per month into your loan payments instead of buying that new couch or booking a holiday consider putting that extra money to good use.
Do you have a mortgage you’re financing currently? Servicing a mortgage can be tough but if you approach HARP Lenders and negotiate a better rate you stand to save a bucket of cash this year. Originally scheduled to end in September 2016, the Harp Government Program has been extended throughout 2018. Homeowner can take advantage of this amazing mortgage rate discount and save a substantial amount of cash. If you owe as much or more than your home’s worth, it can be hard to refinance your mortgage. The requirements for this program are simple provided you’re current on your mortgage payment and have little or zero equity in your home, then you can benefit from the Home Affordable Refinance Program (HARP). Further, if your loan is owed by Freddie Mac and Fannie Mae, the chances are high you could save up to $2,400 a year on with HARP. Check if you meet the basic eligibility requirements on the official HARP site to find out more info on seeking approval.